The deadline for agreeing a post-Brexit trade deal, between the UK and EU, came and went as both sides pledged to continue talks beyond the end of the Brexit transition period at 11pm on 31 December 2020.
The decision to keep negotiations open appears to have been driven by progress on tariffs, suggesting a deal may not be impossible to achieve.
By default, Governments place tariffs on items being brought into their countries to protect local suppliers from advantages firms overseas might gain from state subsidies, lesser regulation or lower labour costs, for example.
A trade deal will usually involve reducing tariffs, limiting them to specific circumstances or scrapping them entirely.
Where scrapped, alternative mechanisms would likely be created to ensure businesses on one side of the deal did not have an unfair competitive advantage over those on the other side.
This is the ‘level playing field’ that negotiators are trying to agree on and could take the form of guaranteed minimum standards of regulation on anything from workers’ rights to animal welfare.
Ultimately, any trade deal involves balancing tariff-free access to markets against the need to implement measures that embody ‘fairness’.
Given the complexities involved in coming to an agreement and waning time, a no-deal Brexit could be on the cards; this would, however, mean that tariffs will apply to goods being moved between the UK and Europe and vice versa.
The reality is, that some of these tariffs could increase costs several times over.
Consequently, if your business trades with the EU and you have not begun to consider the ramifications of a no deal for your operation, you should take action to ensure that you can continue to trade in the event that an agreement cannot be reached.
For more information, or to discuss how a no-deal might impact your business, contact us.